The 1,070 MW Nam Theun 2 Dam in central Laos has attained a legendary but highly contested reputation. In recent weeks, I travelled to speak with villagers living in the resettlement sites of Nam Theun 2 and downstream along the Xe Bang Fai to find out their assessment of the situation.

Women living downstream report they get severe rashes when using the highly turbid river water for household needs, and that they can no longer rely on riverbank gardening because of the fluctuations of the river levels.

International Rivers

Women living downstream report they get severe rashes when using the highly turbid river water for household needs, and that they can no longer rely on riverbank gardening because of the fluctuations of the river levels.

International Rivers. Nov. 2014.

While the dam is only in its fourth year of power production, the Nam Theun 2 is consistently upheld by key financiers - including the World Bank, the Asian Development Bank (ADB) and the European Investment Bank (EIB) - as being a model sustainable hydropower project, expected to generate revenues for poverty alleviation and wildlife protection, making it suitable for replication worldwide. The project led to close to 6,300 people in 16 villages being involuntarily displaced and resettled in consolidated settlements on the Nakai plateau and the dam has impacted more than 110,000 people living downstream and upstream of the project.

In releasing its 2013 annual report this year, the European Investment Bank explained that their EU 45m loan to the project was an opportunity to fund “poverty reduction programmes” and that there are “significant mitigation and compensation measures and programmes to ensure the economic development and improvement in living standards of local affected communities.” Meanwhile, the Asian Development Bank continues to showcase the dam as a “featured project” for poverty alleviation and environmental protection on its website, and the World Bank’s website claims that 2 billion dollars in revenue is expected over the course of twenty years from this “environmentally and socially sustainable development.”

Yet, despite the celebratory rhetoric surrounding the project, the regular reports of Nam Theun 2’s International Panel of Environmental and Social Experts (POE) provide more critical assessments that are grounded in field-based research. The POE has been following the project based on a mandate in its Concession Agreement, and is supported with financing from the World Bank and ADB. Their most recent report, published in May 2014, found that the average household income of resettlers - which is claimed to have surpassed the national poverty line - is in fact “inflated by compensation paid to resettler households and by very substantial illegal income from rosewood and other forest products,” and therefore that this ‘poverty alleviation’ may be short-lived and unsustainable. Questions of sustainability of reservoir fisheries and village agro-forestry initiatives were raised in the May 2014 report, as was the effectiveness of local employees tasked with protecting the watershed area. One respected member of the panel, Dr. Thayer Scudder, has recently distanced himself from the project's so-called successes by publicly stating in an article published in the New York Times in August,“Nam Theun 2 confirmed my longstanding suspicion that the task of building a large dam is just too complex and too damaging to priceless natural resources.” (August 2014)

On the Nakai, I spoke with shopkeepers, youth, elders, the head of the Lao Women’s Union and other local leaders in the resettlement villages of Nam Theun 2. A sentiment of dissatisfaction was widely expressed in relation to the lack of local livelihood opportunities. In particular, people said they were concerned by the lack of land to farm, space for growing families to build new homes or housing additions, and certainty of being able to earn any meaningful income from reservoir fishing. I was repetitively told by people that many have come to the decision to engage in activities labeled as ‘illegal’ in order to earn a basic income. One woman explained that unless families have enough money to purchase additional land in the surrounding lowland areas to farm, some people are returning to the hillsides to do upland farming despite knowing the risk that they could be fined for such activities in the area designated as conservation zones. Another recounted how some villagers sell timber salvaged from the reservoir and from the surrounding forest, even though they risk being reprimanded by authorities, because it brings in needed cash earnings. A small group of men told me that, “For now, selling the wood from here is the only way we can earn money to eat; how else do we make a living? We can sell to buyers from Vietnam, Thailand and also Lao people. There is no land for farming here, so we cannot earn money that way. As for fishing, we can usually only make a little money because the price of fish is set so low by the fish buyers [middlemen] from Lak Sao.”

An active trade in wildlife and illegal timber exists on the Nakai. Officials policing the area and border zones to the east and west of the project are evidently tolerating the demand for such products.

International Rivers. Nov. 2014.

Although I encountered several armed police checkpoints in the vicinity, active marketing of wildlife, including rare civets and wild porcupines, along the roadside and trade in valuable timber from the surrounding forests did not seem to catch their eyes. There was little evidence that they would be proactively working to pull the plug on the sale of such products by clamping down on the source of the demand, including the powerful and well-connected companies identified by villagers, including Phonesack. Instead, police were reported to be involved in a concerted effort to regularly visit a couple of elders who have returned to their old land near the reservoir because of their association to a sacred site there. Although more than ten families continue to go to the sacred site, authorities are evidently actively engaged in an exercise to convince people to abandon their old beliefs and adopt ‘modern’ values.

Downstream, along the Xe Bang Fai River, villagers recounted that food security concerns weigh heavily on their minds. Shellfish, edible seaweed and small aquatic animals that once lived in the shallow water along the river banks have disappeared, and fish catches are low due to water turbidity. Vegetable cultivation in the fertile soil beside the river has also become too risky because of the water level fluctuations and erosion. Some families whose homes are located close to the river fear the erosion will soon mean their housing structures may collapse. In addition, due to the river water having a high level of sediment and suspected bacterial content, women in some of the villages located closer to the dam site reported getting severe rashes when using the water to wash clothes and for other household needs.1 As one headman told me, "Our village has gotten nothing from Nam Theun 2, except dirty river water, skin rashes, lower fish catches and less land to grow rice."

For now, the claims that revenue generated from Nam Theun 2 will finance effective poverty reduction measures, lead to livelihood improvements for affected families and promote environmental management remains an illusion. Indeed, it is an open question how long the World Bank, ADB and EIB will keep pretending this is a model project when procedures for revenue transparency, accountability, as well as the application of social and environmental safeguards, continue to be flouted.

1. Since the publication of this blog, Nam Theun 2 Power Company conducted an investigation into reports of rashes in downstream communities. They concluded that there are only a few cases of skin rashes, and that these cases are unrelated to the water quality of the Xe Bang Fai. No further independent follow-up on the cases reported to International Rivers has been done to date.